Growing premiums: Raising identity-preserved specialty grains

In an era beset by the belief that bigger is always better, Kevin Glanz has built a profitable farming enterprise based on 800 acres of identity-preserved (IP) corn and soybeans.

He says working less acreage means he has more time available to fine-tune agronomic practices and, more importantly, focus on market opportunities.

“I like high yields like anyone else, but I’m just as interested in value,” says Glanz who farms with his wife Sandy near the small town of Manchester in northeast Iowa.

Last year, Glanz says he earned a $4/bu. premium on large-seeded, high-protein soybeans. The total soybean premium paid more than a good part-time job could have provided, he notes.

For 2010, though prices are down, Glanz still expects to earn a $3/bu. premium from soybeans.

“I’m in this to make money,” he says.

More opportunities ahead Other farmers are cashing in on IP soybean opportunities as well. The U.S. Soybean Export Council estimates that roughly 60 million bushels of IP soybeans are grown and sold at a premium for food-grade uses each year. More information is available at www.soybean premiums.org.

Although identity-preserved crops, particularly soybeans, can provide a wider profit margin, Glanz acknowledges, “You do have to roll a few rocks around to uncover the opportunities.”

But the opportunities exist, and more are anticipated as international and domestic economies improve, notes LaVerne Klecker, grain manager for the SunOpta Grains and Foods Group, based in Hope, MN. SunOpta contracts with 3,500-plus Midwest farmers who produce IP-certified organic and non-genetically modified (GM) corn and soybeans for the food manufacturing industry.

Corinne Alexander, Purdue University associate professor of agricultural economics, says the future for IP crops holds promise whenever people will pay for food quality. “When you have a food trend, it creates value in the chain that will pay for the development or establishment of those markets,” she says.

“Consumer demand for specialty attributes won’t go away; it’s just that demand is volatile and goes up and down, like anything else,” Ludwig says.

He says premiums are offered when buyers have a specific market demand to meet. In some cases, the demand results from a government regulation, such as the recent regulations regarding trans fats. More often, however, a buyer needs IP grain that contains a specific composition to meet a manufacturer’s end goals.

“We have one program that requires a hard endosperm in the corn kernel that, when milled, provides a higher yield of corn grits than other corn types,” explains Ludwig, who says the grits go into cereals, snack foods and beer.

Ludwig says that besides meeting a customer demand, specialty IP grains benefit U.S. agriculture in other important ways. Unlike commodity grains, IP products often help farmers connect directly with their customers. IP grain products also help farmers demonstrate they care about consumers’ particular demands and are responsive to them. IP contracts can be available to farmers at any time, but most programs are introduced in the August-through-December time frame, Ludwig explains.

Challenges IP crops also can present a range of challenges for farmers to overcome. That’s particularly true for corn growers.

Alexander says most food and feed manufacturers using a large quantity of corn haven’t been willing to pay a premium for IP non-GM corn.

In addition, non-GM hybrids are a challenge to produce because they are at risk of being cross-pollinated by the more widely used transgenic hybrids, says Peter Thomison, Ohio State University professor of horticulture and crop science.

Growers can minimize the risk of pollen drift at planting through a variety of management practices, such as following guidelines to separate GM and non-GM crops in the field. Taking into consideration prevailing winds during the summer months can also minimize drift problems. Seed certification agencies can offer more state-specific guidelines to help maintain the purity of IP corn crops.

“What’s acceptable purity ultimately depends on the buyer,” says Bob Nielsen, Purdue University Extension agronomist. He adds that a majority of buyers demand IP corn at delivery that is not more than 0.5% contaminated with genetically modified organisms (GMOs).

In some instances, the cost of transportation also has been a negative factor for farmers interested in taking advantage of IP opportunities, says Dennis Strayer, owner of Dennis Strayer & Associates, Hudson, IA. “Unless a grower can find a buyer a reasonable distance from his farm, the premiums usually won’t be enough to cover his costs,” says Strayer, who works as a consultant in the seed and food ingredient industries.

Yield drag with corn and soybean specialty crops has been another detriment historically, but Klecker says he sees that concern diminishing. “I feel that we now have non-GMO corn and soybean varieties that do not have yield drag,” he says, adding that he sees continued work by seed companies to address that issue.

Pioneer, for one, is investing in the development of new high-oleic soybean varieties, which the company will sell under the brand name Plenish.

Despite the challenges, Glanz sees opportunity in the years ahead for growers willing to commit the time and effort needed to make IP crops profitable. He says, “If you’re a smaller farmer and you can’t or don’t want to play the acreage game, here’s a good opportunity.”